The UK’s upcoming divorce from the EU will not come without costs, and no matter what the eventual scenario, those costs will be substantial and far-reaching, on both sides of the fence. UK banks already have a lot on their plates in the form of new-regulation compliance, but it is now or never to prepare for EU-27 inclusion after March 2019.
Financial institutions in the UK are waking up to the inevitability of Brexit, and thus they are beginning to budget for contingency plans, especially after the Bank of England requested that banks submit their plans for a hard exit. Planning ahead now is certainly prudent, as not doing so is guaranteed to leave banks struggling to cope with new regulations and changing market conditions.
Although the fine details have yet to be ironed out, there is no doubt that Brexit will have significant and long-lasting effects on financial-services institutions and businesses in the UK and the EU27. A hard-Brexit is the most jarring scenario, so what are the likely costs of a hard landing after all the negotiations are completed and the dust settles?
Like any divorce, Brexit is going to get complicated—even more so because of the variety of contradictory opinions about how it should be handled. There are four main scenarios, ranging from “smooth” and “transitional” to “cliff-edge” and “chaotic”. Prime Minister Theresa May is rooting for a “hard Brexit”, but many others are hoping for a much softer landing.
Just as the United Kingdom appeared to be making some progress on determining its route out of Europe, British politics once again threw up the most unpredictable of scenarios. The nation’s general election on June 8 resulted in Prime Minister Theresa May’s Conservative Party failing to win a parliamentary majority.
We know through experience that preparing for the worst is a wise strategy, which is why most financial institutions in the UK are currently banking on a “hard Brexit” scenario. No matter what exactly transpires after Article 50 of the Lisbon Treaty is officially invoked, hard work lies ahead, and plenty of it.
Europe’s vision of idyllic unity has lost its glow due to rampant immigration, regulation and debt, causing nationalist parties to ride the waves of public anger. None of these crises have benefited European banks, with some teetering on the brink. But solutions exist that if implemented will restore growth and financial stability.
On June 23, 2016, the United Kingdom (UK) held a referendum on whether to unwind its relationship with the European Union (EU). The UK populace chose “Brexit”. It was a clear vote against the status quo.
Owing to the historic referendum result that has paved the way for the UK to leave the European Union (EU), the City of London—the world’s largest financial sector—is set to be fundamentally transformed, along with the banking sectors in the UK and Europe predominantly.